Mixed Messages as SP-500 Closes at All Time High...

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Stock Market Trends:

- ETF Positions indicated as Green are Long
ETF positions and those indicated as Red are
short positions.

- The State of the stock market is used to determine how you should trade.
A trending market can ignore support and resistance levels and maintain its
direction longer than most traders think it will.

- The BIAS is used to determine how aggressive or defensive you should be
with an ETF position. If the BIAS is Bullish but the stock market is in a Trading
state, you might enter a short trade to take advantage of a reversal off of
resistance. The BIAS tells you to exit that ETF trade on "weaker" signals than
you might otherwise trade on as the stock market is predisposed to move in
the direction of BIAS.

- At Risk is generally neutral represented by "-". When it is "Bullish" or "Bearish" it
warns of a potential change in the BIAS.

- The Moving Averages are noted as they are important signposts used by the
Chartists community in determining the relative health of the markets.

Best ETFs to buy now (current positions):

Long DIA at $161.48 as of December 19, 2013
Long SPY at $181.19 as of December 19, 2013

Value Portfolio:

Long SDRL at $33.90 on June 15, 2012 (Shares were put to us when options expired.
We were paid $1.10 per share when we sold those options and bought shares for
$35.00 each.) We have collected dividends: June 10, 2014 $1.00, March 5, 2014
$0.98, December 3, 2013 $0.95, September 5, 2013 $0.91, June 5, 2013 $0.88,
$1.70 Dec 4, 2012, $0.84 Sep 4, 2012. Total = $6.28 in dividend payments.
Short FXE at $124.19 on August 24, 2012
Long UUP at $22.43 on August 24, 2012
Short FXE at $134.48 on October 4, 2013
Long SDRL at $35.43 on Feb 18, 2014
Long SDRL at $33.50 on March 21, 2014 (Shares were put to us when options expired.
We were paid $1.50 per share when we sold those options and bought the shares
for $35.00 each.) We have collected dividends: June 10, 2014 $1.00.

A modest gap up open was followed by mixed trading and the major indexes closed
mixed, with the S&P-500 recording an all time high close, the NASDAQ-100
reporting a multi-year high close, and the Dow selling off modestly. All three
maintain their position above their 20-, 50-, and 200-Day Moving Averages (DMAs),
in trading states, with a BULLISH BIAS. In fact, except for the canaries, all
equity indexes we regularly monitor are above their respective 20-, 50-, and
200-DMAs and have a BULLISH BIAS and are in trading states, with the exception
of the Dow Jones Transports (IYT 151.62 +0.39) which is in an uptrend
state. The Semiconductor Index (SOX 634.45 -14.90) was crushed losing
more than two percent while the Finance Sector ETF (XLF 22.97 +0.05)
was able to manage a modest gain. Of the three canaries, the Russell-2000 (IWM
114.87 +0.14) was able to post a modest gain to once again close below its
20-DMA and even with its 50-DMA and above its 200-DMA. It is in a trading state
but has a BEARISH BIAS. The other two canaries, the Bank Index (KBE
32.35 +0.09) and the Regional Bank Index (KRE 38.62 -0.01) closed below
their 20-, 50-, and 200-DMAs. They are in downtrend states and shifted to a
BEARISH BIAS on Wednesday. Longer Term Bonds (TLT 115.18 -0.15) appears
to have put in a top posting a modest loss. It maintains an uptrend state and
a BULLISH BIAS. It remains above its 20-, 50-, and 200-DMAs. Trading volume
was essentially unchanged remaining light with 581M shares traded on
the NYSE. Trading volume on the NASDAQ increased to average with 1.878B shares
traded.

In addition to the weekly crude oil inventory report, there was a single economic
report of interest released:

• MBA Mortgage Index for last week rose +2.4%

The report was released hours before the open.

Apple (AAPL 97.19 +2.47) soared after reporting better than expected
earnings. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five
percent of the S&P-500.

Seadrill Limited (SDRL 38.05 +0.05) posted a modest gain. The next
target above remains $40.96, it's closing price on the last trading day of
2013. It is in an trading state. We sold March 2014 $35.00 put contracts for
$150 at the open on Feb 18th, 2014 and bought shares at $35.43. The stock is
now trading ex-dividend for $0.98 and one dollar for total dividends issued
of $1.98. The shares were put to us at $35.00 less the $1.50 per share we
were paid for the puts, so we have an effective price of $33.50.

The U.S. dollar and the Euro were essentially unchanged with the dollar maintaining
its position above its 200-DMA and the Euro below its 200-DMA.

The yield for the 10-year treasuries fell a single basis point to close at 2.46.
The price of a barrel of crude oil rose seventy-three cents to close at $103.12.
The U.S. government reported that crude oil inventories fell -3.969M barrels
last week.

The implied volatility for the S&P-500 (VIX 11.52 -0.72) fell six percent.
The implied volatility for the NASDAQ-100 (VXN 12.91 -0.35) fell most of three
percent.

Market internals were mixed. Advancers led decliners 4:3 on the NYSE while
decliners edged advancers on the NASDAQ. Up volume edge down volume on the
NYSE and at a ratio of 5:4 on the NASDAQ. The index put/call ratio fell -0.13
to close at 0.98. The equity put/call ratio was unchanged at 0.59.

Conclusion/Commentary

While the Dow declined modestly, the semiconductor index was pummeled. The
bank indexes closed relatively flat and with just a modest gain for the Russell-2000.
The S&P-500 and Dow Jones Transports closed at all time highs and the NASDAQ-100
closed at a multi-year high. What does it mean? It means we have mixed information,
which can be confusing and could be clarified in short order but it certainly
does not mean that bulls are in lock step control of the market at this time.
With the bank indexes in downtrend states and with all three canaries reflecting
a BEARISH BIAS, it is time to be careful. It appears the longer-term bond prices
may have put in a top, which could cause a liquidity fueled rally for equities.
We will maintain our current long positions but we will not be opening new
ones just yet and we are willing to exit if we believe that a top has formed.
Stay tuned.

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